SBA 7a Loans Finance Your Business

SBA 7a Loans For Equipment

If your business needs capital, have you considered applying for one of the SBA 7a loans?

The 7(a) is SBA’s most popular program. It may be worth your effort to slog through the variety of specific-purpose loan programs offered through the Small Business Administration.

Why not see if you qualify!

SBA Guarantees But Does Not Fund Loans

First, let’s clarify a frequent misconception. The term “SBA Loan” is misleading. The Small Business Administration does not directly provide funds for the SBA 7a Loans. Local lenders make the loans, which are guaranteed by the SBA.

The SBA supplies specific criteria and guidelines. Once you submit a complete loan application, the lender will submit it to the SBA. If approved, the SBA guarantees to the bank that it will repay a portion of the loan if you default on payments.

Uses For Loan Proceeds

7 (a) loan proceeds can be used for number of businesses reasons. Basic purposes involve acquiring or creating a new business, expanding an existing business, working capital, purchase of inventory, construction financing, purchasing equipment and real estate.

There are a lot of restrictions. You cannot use SBA 7a loan proceeds to reimburse owners for previous cash infusions, or to purchase assets to hold for appreciation.

SBA 7a Loan Eligibility

The SBA 7a Loan eligibility requirements may seems confusing.  You must drill down to the specifics of your business and industry. According to these general requirements, you must:

• Demonstrate a need for funds to purchase or expand your business
• Have a sound business purpose that is not disallowed by the SBA
• Operate as a for-profit business
• Demonstrate the ability to repay the loan
• Good character and credit history
• Have considerable equity to invest in your business
• Not be delinquent on existing debt to the U.S. government
• Your business must meet size standards for the SBA 7a Loans program
• Your business must be considered small within its industry

The “size standards” are defined by either the

(a) number of employees, or

(b) the average annual receipts of the business.

To be classified as a small business for SBA programs, the business must fall below the maximum limit set in the size standards chart. Furthermore, the definition of “small business” varies widely by industry.

If you need further help to determine your SBA 7a loans eligibility, you can can get more information:

1. Send an email to sizestandards@sba.gov
2. Locate a “Size Specialist” at your SBA Government Contracting Area Office at http://www.sba.gov/content/government-contracting-field-staff-directory
3. Pick up your phone and call directly at (202) 205-6618

Businesses Ineligible For SBA 7a Loans

For the general SBA 7a Loans programs, the SBA does not provides specifics about what businesses are eligible. Instead, it outlines what types of businesses are not eligible. For example:

• Businesses engaged in finance or speculation (such as oil exploration, banks and life insurance companies)
• Businesses located in a foreign country
• Pyramid sales schemes
• Businesses involved with gambling, porn, sex or illegal activities
• Lobbying
• Businesses that have caused the government to lose money on prior debts
• Businesses with a major owner (20% or more) that is incarcerated

The list of owners and types of businesses ineligible for SBA 7a loans is extensive and detailed. For more information, review the eligibility article on the SBA website.

SBA 7a Loans – Lifeline For Your Business

Do you have trouble getting financed through traditional bank loans? SBA 7a Loans can be a lifeline to acquire, establish or expand your small business.

As you can imagine, the SBA wants to avoid fulfilling their loan guarantee to the bank. SBA 7a loan requirements are quite specific. You must prove creditworthiness. But if it seems daunting, remember that the SBA is there to help small businesses.

Assemble all your documents. Be thorough and prepared. The time consuming process for completing the application may be your ticket to business success.